• Home
• /
• Business

Gold hits six-week high as dollar slumps

LONDON - Gold hit a six-week high on Wednesday as the dollar tumbled to a record low against the euro, but dealers traded cautiously ahead of a testimony by US Federal Reserve Chairman Ben Bernanke.

Analysts were not yet convinced the upward price move was sustainable as recent spikes prompted investors to take profits.

“We are not really picking up a clear trend in gold at the moment,” said David Holmes, metals analyst at Dresdner Kleinwort.

“The market is generally long with a positive outlook, but the trouble is that there is no new money flowing into the market to help us make the next leg of the move on the upside.”

“It’s partly related to the fact that we are entering into the summer period. Gold would find it easier to move higher in the fourth quarter of this year, but in the interim it’s going to be relatively range-bound, with good interest to buy gold on dips and profit-taking is going to limit moves on the upside.”

Spot gold rose as high as $669.60 an ounce and was quoted at $667.50/668.10 by 1006 GMT, against $664.60/665.40 in New York late on Tuesday.

The dollar slid to a 12-year low against a basket of major currencies, hurt by fears that troubles in the US housing sector will necessitate rate cuts at a time when other central banks are tightening policy.

Pressured by news of problems at two Bear Stearns hedge funds that bet heavily on subprime loans, the dollar set record lows against the euro and a 26-year trough versus sterling.

Investors are looking for further clues on the US rates outlook from US consumer prices data for July at 1230 GMT and Congressional testimony by Federal Reserve Chairman Ben Bernanke later in the session.

Gold often moves in the opposite direction of the dollar.

“I think there has been a little bit of improvement in investor interest in gold. I certainly think the weakening in the US dollar has been a factor in that,” said David Moore, a commodity strategist at the Commonwealth Bank of Australia.

Any signs of concerns from Bernanke about problems in the subprime mortgage market may prompt more dollar selling and lift gold’s appeal as an alternative investment, dealers said.

Some dealers said the recent inflow into exchange-traded funds (ETFs) suggested investors were slowly regaining confidence in gold.

Data showed bullion held by StreetTRACKS Gold Shares, the world’s largest ETF, rose to 487.92 tonnes from 469.91 tonnes from a week ago.

In other metals, platinum rose to $1,311/1,314 from $1,307/1,311 an ounce in New York, while palladium dipped to $364/368 an ounce from $365/369. Silver rose to $12.97/13.01 an ounce from $12.91/12.96.